ED Files Complaint Against SIMPL for FEMA Violation Worth Over Rs.913 Crore
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The Enforcement Directorate (ED), Bengaluru Zonal Office, has filed a formal complaint under Section 16(3) of the Foreign Exchange Management Act (FEMA), 1999 against a company named M/s One Sigma Technologies Pvt. Ltd., which operates the mobile app SIMPL, and its director Nithya Nand Sharma. The company is accused of violating FEMA provisions involving a total amount of ₹913.75 crore.
Background of the Case
The ED started investigating the case based on credible information that the company had received a large amount of Foreign Direct Investment (FDI) from the United States of America, allegedly violating India’s existing FDI rules. The company operates the well-known SIMPL mobile application, which offers a Buy Now, Pay Later (BNPL) service—allowing customers to make purchases and pay in installments at a later time.
Details of FDI Received
As per ED’s investigation, One Sigma Technologies Pvt. Ltd. received FDI worth around ₹648.87 crore and issued Convertible Notes worth ₹264.88 crore. The company claimed that it was engaged in Information Technology and computer services, which comes under the 100% automatic route for FDI, meaning it does not require prior approval from the government.
What the ED Found
However, the ED examined the company’s business and revenue model and found that its actual activities fall under the category of financial services. According to RBI’s guidelines (Circular No. 8 dated 20.10.2016), FDI in financial services that are not regulated by any authority requires prior approval from the Government of India. Additionally, if a company needs government approval for its FDI, then it also needs approval for issuing Convertible Notes—a form of investment instrument.
Despite these requirements, SIMPL received FDI and issued Convertible Notes without getting any government approval, which is a clear violation of FEMA rules.
The total violation, combining both the FDI received and Convertible Notes issued without approval, amounts to ₹913.75 crore. Because of this, the ED has stated that the company has violated the provisions of FEMA, 1999 and is liable to be acted against under Section 13 of the Act.
In light of the above violations, the ED has now filed a formal complaint under Section 16(3) of FEMA, 1999 with the Adjudicating Authority, which will further examine the matter and take appropriate legal action.